Fed officials jawbone the markets and spread disinformation. They figure it's part of their job as central planners. It's not enough to pull the levers and twist the knobs on interest rates, the money supply, and asset prices. They also want to manage investor psychology. It's all smoke and mirrors.

Frustrated metals investors wonder just how long officials will maintain their hold over markets when so much of what they say turns out to be garbage and so much of what they do ends in failure.

The answer is perhaps not much longer. There are real cracks emerging in the credibility of the Fed. It has taken years, but investors and pundits are finally questioning whether the Fed knows what it's doing. They have progressed from the blind worship of Alan Greenspan, who engineered first the Dot.com bubble and then the housing bubble that made people feel so wealthy, to wondering if they can believe a word Janet Yellen says.

Following the most recent FOMC meeting, CNBC's Steve Liesman, heretofore one of the Fed's biggest apologists, asked Janet Yellen this difficult question; "Does the Fed have a credibility problem in the sense that it says it will do one thing under certain conditions, but doesn't end up doing it?"

Yellen responded with typical "Fedspeak" and did nothing to shore up confidence:

Well, let me start -- let me start with the question of the Fed's credibility. And you used the word "promises" in connection with that. And as I tried to emphasize in my opening statement, the paths that the participants project for the Federal Funds rate and how it will evolve are not a pre-set plan or commitment or promise of the committee.

Indeed, they are not even -- the median should not be interpreted as a committee-endorsed forecast. And there's a lot of uncertainty around each participant's projection. And they will evolve. Those assessments of appropriate policy are completely contingent on each participant's forecasts of the economy and how economic events will unfold. And they are, of course, uncertain. And you should fully expect that forecasts for the appropriate path of policy on the part of all participants will evolve over time as shocks, positive or negative, hit the economy that alter those forecasts.

So, you have seen a shift this time in most participants' assessments of the appropriate path for policy. And as I tried to indicate, I think that largely reflects a somewhat slower projected path for global growth -- for growth in the global economy outside the United States, and for some tightening in credit conditions in the form of an increase in spreads. And those changes in financial conditions and in the path of the global economy have induced changes in the assessment of individual participants in what path is appropriate to achieve our objectives.

Translation: Yellen and the rest of the FOMC find the economy totally unpredictable and no one should rely on what they say.

Evidence shows that investors are losing faith as they realize just how artificial and micro-managed the markets are. Steve St. Angelo from SRSRoccoReport.com reports on the collapse of trading volume in Dow Jones stocks, even as stock prices move higher. Fewer and fewer retail investors care to play, while a handful of major investors - almost certainly including the Fed and its primary dealer banks - busily "paint the tape" with a picture of growth.

Confidence may erode slowly, but at some point markets can collapse suddenly. Fed officials and their misguided policy is vulnerable now to some trigger event that destroys whatever faith people still have.

The chickens are coming home to roost. For example, last week the city of Chicago lost the battle to curb public employee pensions. The Illinois Supreme Court upheld the state's constitution which protects public pensions from being "diminished or impaired." Now Chicago will struggle to avoid bankruptcy as it must find billions of dollars to shore up its massively underfunded pension obligations.

Much of the blame for the debacle in Chicago and for huge pension shortfalls across the country should be laid at the feet of the Fed and its Zero Interest Rate Policy. These retirement funds planned for much higher interest yields than the Fed has permitted in the last several years.

Now pensions are woefully short of what is needed to meet their obligations and some very hard choices must soon be made. Elected officials will need to decide whether to impose major tax hikes to cover the generous benefits that were promised, make big cuts (where allowed), or default.

Retirees have long been frustrated that banks pay nothing in interest on savings, and yet they are getting crushed by a rising cost of living. (This problem has been discussed frequently by our friend Larry Parks of the Foundation for the Advancement of Monetary Education).

So far, the above concerns have not held much sway at Fed policy meetings. Perhaps the burgeoning pension crisis will be the final straw.